A car loan is an agreement between you and a lender that allows you to borrow money to pay for a vehicle. You’ll typically have to make monthly payments until you’ve paid off the loan, and interest is charged on the amount you owe. Car loans can be arranged with many lenders, including banks and credit unions. You can also find them through car dealerships, which sometimes offer special financing deals to attract buyers. It’s important to compare multiple offers before you decide which one is best for you.

Your loan terms are determined by your financial history and credit scores. The higher your credit scores are, the more creditworthy you appear to lenders and the better your loan terms will be. If you have poor credit, it may be necessary to apply with a co-signer or find lenders that specialize in lending to low-credit borrowers.

You can use online calculators and budgeting worksheets to help you determine how much you can afford as a monthly payment for your car loan. The more you know about what you can comfortably afford, the easier it will be to find a car that fits your needs. You should also factor in any costs you may have for a down payment and optional add-ons like service contracts, credit insurance or extended warranties.

When you’re ready to shop for a car, get pre-approval for financing before you visit a dealer. This will give you an idea of the rates you can expect to receive, and it may also be helpful when negotiating prices with dealers. It’s also a good idea to compare financing offers from other lenders in addition to the dealer’s.

A down payment is often required with a car loan, and the larger the down payment, the less you’ll have to pay in monthly installments. Depending on your financial situation, it may be a good idea to consider applying for a car loan with a co-signer or finding a lender that works with low-credit borrowers.

Car loan repayments are reported on your credit report, so regular payments can help you build a solid credit history and improve your chances of future loan eligibility at a lower rate. In addition, paying off a car loan early can save you money and turn it from a liability into an asset.

Purchasing a vehicle up-front in cash isn’t feasible for most people, and draining your savings can put you in financial trouble in the event of an emergency or unforeseen expense. Car loans allow you to purchase a vehicle and save up money for the future.

A buy-here-pay-here loan is a type of auto loan that’s offered by dealerships. These loans usually feature high-interest rates and can be risky for consumers, as the vehicles sold by these dealerships aren’t always of the highest quality. To avoid these risks, you can look into alternative auto loan options with banks and credit unions that aren’t affiliated with the dealership.